Worrying Number of UK Organisations Lack Supply Chain ‘Plan B’

Nearly two and a half years since the oft reported ‘horsemeat scandal’ and many organisations are still lacking a Plan B for a supply chain crisis, according to a survey by CIPS.

CIPS quizzed senior supply chain managers from across the globe on a number of topics, with the research throwing up a number of surprising statistics, all of which show that many organisations are just not learning the lessons of past failures in the industry.

No Risk Mitigation

At the most basic level when considering a subject like a supply chain scandal is the concept of risk mitigation strategies. These can be for ensuring continuity of supply in the event of a natural disaster or alternative suppliers if sourcing has to be changed due to ethical issues.

CIPS found that two-thirds of the respondents didn’t have, or weren’t aware of, a mitigation strategy covering all tiers of their supply chains. Compounding this is a lack of close relationships with suppliers (only 11 per cent) and the majority (65 per cent) of the managers only having relationships with Tier 1 suppliers or not at all.

Not Managing Relationships

With procurement often focused on reducing cost, reducing supplier lists and eliminating tail spend, relationships can often be overlooked with larger, more critical suppliers. These relationships can help to build trust, maintain ethical standards and can also help to reduce cost in the long-term.

And the statistics back this up too, with the survey results showing a big difference in organisations suffering a supply chain crisis in the past year.

• 67 per cent with relationships with Tier 3 suppliers and beyond highlighted zero supply chain crises
• Only 45 per cent with Tier 1 supplier relationships could say the same

Supply Chain Fog – Low Visibility

When considering supply chain transparency (reported recently on Procurious here and here), these relationships can also be a key pillar for buyers in avoiding disruptions. According to the survey:

• 56 per cent with relationships with Tier 3 suppliers and beyond had complete visibility of their supply chain
• A worrying 13 per cent with only Tier 1 supplier relationships were able to say the same

A similar difference is seen with malpractice and ethical violations in the supply chain too.

• 49 per cent with Tier 3 supplier relationships could be certain of no supply chain malpractice, compared to just 16 per cent with Tier 1 supplier relationships
• Of these, 62 per cent with Tier 3 relationships would take responsibility for malpractice, versus 32 per cent with Tier 1 relationships

Taking Responsibility

In light of these results, David Noble, Group CEO of CIPS, stated that it was time for UK organisations to take responsibility for the conditions in which their goods were being produced.

“As UK companies are increasingly using suppliers in emerging markets to maintain their price competitiveness, they are becoming more exposed to reputational risks such as poor health and safety standards for workers or even enforced slavery, bribery and corruption, as well as environmental degradation.

Having visibility and strong supplier relationships at the first tier of the supply chain is clearly no longer enough, as these risks do not always exist in the first tier, but often further down supply chains.”

Procurious wants to make it easier for companies to do this, and has proposed the idea of a ‘Supply Chain Wiki’, which would enable organisations to have access to the full picture in their supply chains. It’s only by working together that the profession can create something like this and allow us to get to the stage where transparency is a given, rather than an option.

Do you want to get involved with helping build a Supply Chain Wiki? What examples of the practices above have you seen? Get in touch with Procurious and let us know.

Meanwhile, some light reading for you all with your weekly procurement and supply chain headlines.

Supply chain wary as Airbus and Boeing push output envelope

• Suppliers to Airbus and Boeing are worried they might lose out if they invest to meet higher commercial jet production targets that ultimately prove unsustainable
• The manufacturing giants plan to raise production rates of best-selling single-aisle planes by 25 percent to 50-52 a month in 2017-18, with the possibility of output going up to 60 or more
• This prompted public pushback from major suppliers such as GE and partner Safran, who said they needed to secure the start of a steep rise in output before committing to even higher targets
• Concerns were also raised over how long any higher production rates may last, although Airbus CEO Fabrice Bregier dismissed talk of a bubble

Read more at Business Insider

Made in Britain: Booming UK automotive industry must re-shore IT to future proof supply chain

• The UK automotive industry is back on track after years of decline, with many pointing to the important role it plays in improving the economy
• According to the Society of Motor Manufacturers and Traders (SMMT) UK car plants last year produced more than 1.5 million vehicles, the highest number since 2007
• One of the factors underpinning the increase has been the decision by car makers to re-shore many of the processes, including production, that have been systematically transferred overseas over the past couple of decades
• The survey found that cost was but one driving factor, and was in fact eclipsed by the desire to improve quality, create shorter, more responsive supply chains and streamline communication with customers

Read more at IT Pro Portal

Mattel looks to overcome supply chain talent shortage

• Mattel Inc. is revamping its supply chain operations but says there is a limited pool of people with the right skills
• Companies are looking inward to find people to manage increasingly complex supply chains, amid a shortage of skilled labor
• Peter Gibbons, the company’s chief supply chain officer, said in an interview, “Finding really good people who’ve been there and done it before is a challenge.”
• The company is now hiring college grads directly from supply chain or business programs in hopes of moulding them into supply chain leaders down the line. It has also changed the metrics it uses to evaluate its supply chain managers to take a more “holistic” view of the job function

Read more at Wall St Journal

US to import egg products from Netherlands to ease shortage

• With an increasing egg shortage due to the widespread bird flu outbreak, the United States will soon allow imported egg products from the Netherlands to be used for commercial baking and in processed foods.
• It’s the first time in more than a decade the U.S. has bought eggs from a European nation, and comes as consumers are seeing a surge in shell egg prices and a Texas-based supermarket began limiting purchases.
• The H5N2 virus — which began to spread widely through Midwest farms in the early spring, including in Iowa, the nation’s largest egg producer — has left nearly 47 million birds dead or dying
• “Our members are not able to get their hands on enough eggs to continue their production. It’s very much a crisis for us right now,” said Cory Martin, director of government relations for the American Bakers Association, a trade group representing wholesale bakeries including cookie and cracker maker Pepperidge Farm, Krispy Kreme Doughnut Corp., and White Plains, New York-based Linden’s Cookies.
• Prices for egg products used by food manufacturers and bakeries jumped more than 200 percent in the past month, and even large bakeries have been forced to buy eggs by the carton and crack them individually to continue production, Martin said.

Read more at US News and World Report

Industry body launched to support timber supply chain

• The ethical, social and environmental risks in the timber supply chain are to be addressed by a newly-formed umbrella organisation which aims to provide a unified voice for the timber industry and ultimately grow the UK’s low-carbon economy.
• The Confederation of Timber Industries (CTI) will represent the timber supply chain from forest to end-of-life recycling and energy recovery; consolidating and enhancing the various links in the timber supply chain and building more relationships with new industry partners.
• Dr Peter Bonfield, chief executive of BRE, launched the CTI. He said: “This Industry has needed a stronger joined up voice for a very long time. This is a great moment for the Timber Industries to demonstrate their combined strength and showcase the Industry.
• The timber supply chain contributes substantially to the UK’s construction and manufacturing industries; providing jobs across the skills spectrum and adding value of around £20bn to the UK economy. It is among of the most complex in the world with a huge diversity of operations worldwide and a downstream process that involves many steps from harvesting through to sawmill, wood processing and distribution.

Read more at edie.net